Commentary: The Big Hammer to Force Everyone to Buy Health Insurance

by John McClaughry

The 2018 legislature, alarmed by the repeal by Congress of the Obamacare tax on persons who failed to buy government-approved health insurance, decided to impose a state mandate to do the same thing, to take effect for the 2019 insurance year.

But the legislature balked at announcing the penalty needed to enforce its new mandate. It created a working group to recommend “a financial penalty or other enforcement mechanism” by November 1. That group’s inconclusive draft report is now out. It’s encouraging that some of the seven members balked at inventing a new Big Hammer, leaving open the precise method for enforcing the mandate.

Whatever Big Hammer the legislature and governor select to drive people into buying government-approved insurance, some will necessarily be exempted. The Obama administration created fourteen classes of mandate exemptions, notably “hardship”, and millions of people escaped from having to pay the penalty tax.

The Federal law explicitly exempted from the tax families participating in four recognized Health Sharing Ministries. These voluntary networks of Christian concern do not offer insurance; instead, their participants agree to pay every month their calculated share of the medical expenses of all participants. These ministries are superb examples of a civil society of shared concern, whose members cooperate in meeting their health care needs. They ought to be strongly encouraged, and their enrolled participants exempted from any mandate. The legislature would do well to ignore Blue Cross Blue Shield of Vermont’s disgraceful opposition to exempting sharing ministry members.

No matter what exemptions are agreed upon, the Big Hammer will still fall on thousands of Vermonters. This will be an unfair Robin Hood in Reverse scheme, and an intolerable intrusion upon the liberty of Vermonters.

Vermont laws dating back to 1991 rescued Vermont Blue Cross Blue Shield from impending insolvency, by driving out almost all of its competitors in the individual and small group (under 100 employees) markets. This was achieved by imposing age-based “community rating” of premiums in those markets – all ages pay the same. Young, healthy Vermonters, just starting out in their careers and families, were thus saddled with subsidizing the higher health insurance costs of their older, sicker, but richer grandparents.

In addition, everyone with private health insurance is forced to absorb the costs of the State’s drastic provider underpayment of Medicaid services that cover 30% of the state’s population.

Many self-employed younger, healthier families with limited incomes, faced with high premium costs caused by forced subsidies for their elders and the required cross-subsidy to keep providers from exiting Medicaid, gamble and go without insurance. The state mandate is required to deny them any escape.

The working group, focused on designing a Big Hammer, regrettably ignored a workable liberty-respecting alternative: no insurance mandate, but an income tax-based recapture of unpaid medical bills from those who can afford to pay for what they received.

Here’s another reason why the mandate law enacted this year should be repealed: Gov. Scott has appealed for programs to attract healthy working age immigrants into the state, productive people “who share our values and want to raise their family in the safest and healthiest state in the country.”

If the legislature adopts a Big Hammer to force everyone into buying state-approved health insurance, we’ll need to add a candid extension to that appeal:

“For those of you who are young and healthy, choose to come here, and want to start your own enterprise, I should remind you that unless you go to work for an employer that offers approved coverage, you will have to purchase health insurance having rather expensive ‘minimum essential coverage’”.

“The premium rates you’ll pay don’t take into account that you’re young and healthy. In fact, our community rating rule taxes people like you to subsidize the old and sick, even though our older generation is notably wealthier than yours. Why? Because the legislature wanted to subsidize the medical bills of the older and more politically influential generation, and decided to make your generation provide the subsidies through much higher premiums.”

“What happens if you don’t buy the required insurance? Don’t worry – you won’t go to jail. You’ll just be hit with a tax or fine sufficient to make you reconsider your choice not to buy coverage (or your choice to come to Vermont in the first place).”

“Our website for prospective immigrants will show you the price list for self-employed health insurance policies that you must select from, to avoid the annoyance and expense of the penalties imposed on the non-compliant.”

“Yes, there are other states with lower taxes, fewer regulations, more opportunities, a warmer climate, lower energy costs, lower health care costs, and no insurance purchasing mandate, but they can’t offer “our socially responsible culture!”

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